Surprising Growth

Why have Warren Buffett-style consumer brands lagged behind the technology stocks?

Investing in brand-name consumer products, once the buy-and-hold, sleep-at-night formula for riches, has lost much of its appeal. Just compare the performance of Berkshire Hathaway, the repository of great American brands assembled by legendary investor Warren Buffett, with that of Bill Gates' Microsoft--or Dell or Intel. Is Coke no longer "it"? Have brands like American Express and Disney lost their luster? What has caused Buffett-style consumer brands to lag behind the big tech stocks?

Ironically, it's the notion of surprise. The market now values accelerating growth over consistent growth. Starting in the mid-1980s, investors became wary of U.S. industrial and cyclical...

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